Hello all. Suominen reported their Q3 this morning, and I have here with me the company CEO Charles Héaulmé. Hi Charles.

Hi Rauli.

So let's start with the usual question: what were the key points, highlights and lowlights for you from the quarter?

Okay, so summarizing the quarter three twenty twenty six, I would say that at Suominen, first of all, the first highlight is that we have better results overall from a profitability point of view and at a higher level than last year and than the first and second quarter of twenty six. Second highlight. I would mention is the fact that we started with the commercial production on our new line in Spain in Alicante, and that line is dedicated to sustainable production, meaning non-plastic, non-polymer based. And then a further highlight would be that we are starting seeing tangible benefits from the implementation of our Full Potential program that we started and that we communicated earlier this year and started to execute during the course of the first semester.

Diving into those more, so maybe looking at firstly your volume development and flatish volumes, well the comparison period was pretty weak due to your production disturbances back then, so why were the volumes kind of only flat given the quite easy comparison?

You are right to remind that Q3 last year was suffering some operational issues, particularly on our line in the US, this year first of all. I would mention that the new line in Spain that we started, where we started commercial production during most of September, had a very negligible impact on our volume of the third quarter. So it will start having more impact as of Q4 and even more in twenty twenty seven, obviously. That's the first thing. Second. Yes, we also had operational issues with our production lines in the US during the third quarter. Sounds like almost the routine, but we are working in that on securing that our manufacturing equipment will become much more reliable going forward. This is one of the big chapters in our Full Potential program.

Nonetheless, we had at the end of June two line stoppages in the US, and that had an impact on the volume. The third quarter, we have been able to restart the tooling. As of August, so obviously quite an important impact. And there is the third issue, which was deliberate from our side. We identified a payment problem from one relatively large customer and we prudently decided to lower the exposure that this would represent before we know better the situation. Positively, the situation of that customer has largely improved in October and our exposure has largely reduced, but within the third quarter. We had to take some provision to it, and then also we had to decide deliberately to lower the supply to the customer. That meant production remaining in our inventory and also lower volume sold too. Translating into sales, those are the key factors for the quarter, which is okay from a sales point of view, but not terrific indeed.

That is clear. Then looking at profit line. Your adjusted EBITDA improved quite a bit compared to the weak comparison period last year, but also compared to Q2 despite you had now some operational issues again, so what were some of the positive drivers driving that result up?

So a couple of things that are directly linked to the Full Potential program that we are implementing. First of all. We have reduced our expenses, our fixed costs, that's a first impact. Second, we have taken some portfolio measures to be progressively dependent. It's not something that we do overnight, obviously, but progressively less dependent on commodity part of the portfolio and further. We start seeing already some improvements linked to our manufacturing continuous improvement program, particularly in the factories in the West, where we had most actions being taken, that is starting to improve the situation.

Good, good. And regarding that, you have talked this year about this importance of the production reliability and quite openly said that there is a possibility that we will see these kind of disruptions like we saw now in Q3, so when exactly should your production be actually at that point that we wouldn't kind of have a major risk for such events anymore?

Risk zero does not exist, but it is clear that we have said. Transparently that we entered into this Full Potential programme at the beginning of twenty six with a significant maintenance debt, which has accumulated over years, of course. It takes time to close the gap on all these lines, so to be more precise about your question, when should we start seeing more assurance. On our assets and reliability. I would say mid-twenty twenty seven. I will not tell you first of January twenty twenty seven because, for instance, the factory where we have most of our programs ongoing, these started within Q3, it continues and it will continue in the first semester. So I would say by mid-twenty twenty seven, which would start really thinking. Seeing this much more reliable and then from a growth front of view. We will also by that time be at a relatively good output level on our new line in Spain, which of course will help also the volume.

Sure, sure. Then looking a bit deeper in the numbers, you had quite clearly negative cash flow in the quarter due to working capital build-up. You a bit alluded to the factors already, but can you open up kind of how do you see that going forward? Is this a temporary build-up or something structural as well?

Yeah, the simple. Answer is yes. It is temporary. So more in detail, what do I mean to get to? You already know about some of the reasons. Why we increased our inventory of finished goods by prudence, because we lowered the supply to a special customer. Second, some large customers, particularly in the US, they value a lot lead time and safety stocks. So we have to think a little bit more in terms of having material available for them on a consistent basis, but the big chunk of the working capital impact on the cash flow is coming from raw material inventory, which we have increased a lot in the third quarter voluntarily at the beginning, but more than we thought by the end of the quarter, to be fully transparent. So we will normalize this during Q4, potentially in Q1 twenty one seven, but mostly in Q4. This is why we have done that. Well, because we have seen early in the quarter. We have seen lead time increasing a lot. Particularly for supply from Asia, for instance, and we saw in specific materials some short supply and therefore we don't want to be in the risk of not being able to produce. Therefore we pushed a bit the supply a little bit too much. Okay, so that will normalize in Q4.

Okay, okay. That is clear. Then you mention also in the report that you had negotiated some changes in the covenants, which I would suggest that things haven't gone exactly as you planned on that front, so is that related to the working capital build-up or is there kind of something other in that?

Yes, of course, the working capital does not help. Negative cash flow of eight million in three did not help from that point of view. The other side of the coin for the leverage is the profit generation itself, and there this is of course calculated with the twelve-month rolling and included in there are Q4 twenty twenty five and Q1 twenty twenty. Six, which were very low quarters. So that influences. I'm not saying this is going to change overnight. Also, Q4 twenty twenty six might not be as high as Q3 twenty twenty six, but we project. Yep, sure, there.

Then also, as we know, you have this bond maturing in June and you mention in the report you are preparing to refinance well ahead of the maturity. So should we expect some activity already this year on that front given the wording?

Well, the wording says what it can say, yes. We have a bond coming to maturity mid-twenty twenty seven. So it is natural that we start preparing for the transition of it. It is a fact that we are well advanced in the analysis and in the planning phase. We will communicate as soon as it is possible and relevant, yeah. Sure, sure.

Understood. Then looking a bit forward, the oil prices obviously took quite a big jump up in September. October. Now again a bit lower, but anyhow, how do you see. The increase in the raw material prices for Q4, so how's the outlook regarding that for your kind of pricing and profitability? Is it similar to what we saw in Q2 for you, or have you been able to kind of improve the pass-through of the raw material cost?

Yes, we continue obviously to manage the pricing in as agile solutions as possible. We are more back to quarterly and monthly, but still being pretty agile in pushing the pass-through. Oil prices are going up and down. This is really difficult to forecast precisely. Anything pricing for Q4 is by now set, obviously, and yes, increases pushed to Q4 because of the overall cost situation. At the same time. I would say that if we continue to have high oil price. The fact that we have high raw material stock at the end of Q3 may be a mitigation factor. I'm not saying that this is going to be a major profit. Positive impact, but it's at least a mitigation factor.

Sure. Then lastly, the guidance for full year was maintained and you have already accumulated for nine months quite close to that amount of earnings, so it looks quite safe, but is there anything you want to point out on the outlook for the last quarter there?

No, why we have not changed it can be looked at positively or less positively. The fact that we are not changing it. We see full year twenty twenty six better than last year twenty twenty five. Q4 also better than Q4 last year, but Q4 last year, as I said before, was extremely depressed. It does not mean, you know, it's not going to be, we don't see that it is going to be significantly higher. That's the reason we do not change the guidance.

That's clear. Thank you for all the comments, Charles, and good luck for the rest of the year.

Thank you, Rauli. Thank you and good day.